I’ve heard from my libertarian friends of the beauty and efficacy of an open unfettered marketplace. They maintain that regulation causes inefficiencies and the less there is the better. In medicine there are necessary protections to assure safety (if not efficacy) of medical interventions. But also there is a regulation that assures excess profits for drug developers, i.e. patents.
The recent article in the New Yorker Ebolanomics highlights the costs of drug development and offers a new model for drug development.
When pharmaceutical companies are deciding where to direct their R. & D. money, they naturally assess the potential market for a drug candidate. That means that they have an incentive to target diseases that affect wealthier people (above all, people in the developed world), who can afford to pay a lot. They have an incentive to make drugs that many people will take. And they have an incentive to make drugs that people will take regularly for a long time—drugs like statins.
Read the article for more.
In addition to trying to develop drugs that are used by “everyone” as noted in Ebolanomics, gouging the sickest patients to increase drug company revenue seems to be the alternative model of the drug development. The excessive prices appear to be unlinked from development costs or efficacy and are solely dependent on how desperate the patients are, the more malignant the disease the higher the cost. Drug costs for cancer patients since the 90’s have increased by a factor of almost 100. I recall new drugs in the early 90’s in the range of a few hundred dollars/dose. By the end of the 90’s that cost was $1000/dose and with the advent of targeted drugs that cost is over $100,000/year.
Medications have become the most expensive part of medical care. A drug now costs more than that Mercedes you’ve been eyeing. And if it were developed for cancer treatment as often as not it provides just a few months of benefit.
Drug company costs are hidden behind a veil of secrecy and obfuscation. Ironically the drugs that are really effective have the shortest development cycle and lowest cost to bring to market. Consider for example the first targeted agent for chronic myelogenous leukemia, imatinib (Gleevac). The drug was developed with government provided research funds. In it’s first clinical trial it’s efficacy and safety were immediately evident and it’s use revolutionized therapy. It was immediately taken private and quickly became the most expensive drug on the market. That despite the government funding and the short drug development cycle. Charging $100,000 or so/year for it is not based on cost but rather greed.
On the other hand consider the numerous drugs with limited efficacy, i.e. drugs looking for an indication. These agents are tested and tested and tested and eureka when a one or two month benefit is found, even if it’s a delay to progression with no survival benefit, it is heavily marketed as the second coming and sold for the same price as the truly effective agents, if any. In this case costs are driven up by the drug’s lack of efficacy and need for many many many trials to find a use for it.
Medicynical Note: Patents appear to have outlived their usefulness when it comes to drug development. There is no incentive in the system to provide value or for that matter efficiency. Pricing has been delinked from development and marketing rules the roost. Drug companies interest is in revenue, not healthcare.
Encouraging competition by eliminating patents will do away with the marketing nonsense. A path to new and innovative drugs would need a new paradigm and the approach offered in Ebolanomics offers one approach.